Audit (A-06-11-00067)

Complete Report

Summary

Section 330 of the Public Health Service Act established the Health Center Program. Under the American Recovery and Reinvestment Act of 2009 (Recovery Act), the Health Resources and Services Administration (HRSA) awarded a number of grants using Recovery Act funding in support of the Health Center Program, including Health Information Technology Implementation (HIT), Capital Improvement Program (CIP), New Access Point (NAP), and Increased Demand for Services (IDS) grants.

During fiscal years 2010 and 2011 (February 1, 2009, through January 31, 2011), Barrio Comprehensive Family Health Care Center, Inc. (Barrio), received approximately $9.8 million (Federal share) in section 330 grant funding to supplement its health center operations. For project periods ranging from March 2009 through May 2012, HRSA awarded Barrio funding for five Recovery Act grants totaling $7.5 million.

Of the $16 million that we reviewed, $3.4 million was allowable. We could not determine whether salary and fringe benefit costs totaling $12.5 million that Barrio claimed were allowable because Barrio did not maintain personnel activity reports for employees who worked on its section 330, HIT, NAP, and IDS grants and because the accounting records for the section 330 and NAP grants did not separate expenditures related to the Federal grants from those related to other funding sources. Barrio recorded additional potentially unallowable costs of $50,000 for compensation increases and $9,000 for interest expense.

Barrio did not have adequate controls over its financial management system. Specifically, Barrio did not draw down funds based on the cash needs for each project and did not prepare and complete bank statement reconciliations in a timely manner. Also, Barrio did not have adequate procurement procedures to ensure that it obtained reasonable pricing when procuring goods and services.

We recommended that HRSA require Barrio to (1) refund $12.5 million to the Federal Government for salary and salary-related expenses, or work with Barrio to determine whether any of the $12.5 million was allowable; (2) refund $50,000 to the Federal Government for salary increases charged to one of the HIT grants, or work with Barrio to determine whether the increases were reasonable; (3) refund $9,000 of the NAP grant to the Federal Government for interest expense related to a capital lease, or work with Barrio to determine whether any of the $9,000 was allowable; (4) develop and implement procedures to maintain personnel activity reports for each employee who works on Federal awards; (5) ensure that its financial system provides accurate, current, and complete disclosure of financial results, identifies the source and application of funds for HHS-sponsored activities, and accounts for grant funds separately from all other funds; (6) develop and implement procedures requiring analysis of lease and purchase alternatives; (7) develop and implement procedures to ensure that requests for cash advances are limited to the amounts needed to carry out approved projects; (8) follow its policies to ensure that bank statement reconciliations are prepared and approved monthly; and (9) develop and implement procedures to make and document a cost analysis for each procurement action. Barrio disagreed or partially disagreed with our recommendations. HRSA concurred with our recommendations.